I'm the Founder and Managing Partner of Ironfire Capital LLC, which runs a tech-focused hedge fund and angel fund. I did a Ph.D. in Management at the Columbia University Graduate School of Business in New York, with a specialization in Strategic Management. You can follow me on Twitter @ericjackson, subscribe to me on Facebook, follow me on Sina Weibo, or Circle me on Google+. My email is: dr.eric.jackson@me.com

Top Ten Reasons Why Large Companies Fail To Keep Their Best Talent

Whether it’s a high-profile tech company like Yahoo!, or a more established conglomerate like GE or Home Depot, large companies have a hard time keeping their best and brightest in house. Recently, GigaOM discussed the troubles at Yahoo! with a flat stock price, vested options for some of their best people, and the apparent free flow of VC dollars luring away some of their best people to do the start-up thing again.

Yet, Yahoo!, GE, Home Depot, and other large established companies have a tremendous advantage in retaining their top talent and don’t. I’ve seen the good and the bad things that large companies do in relation to talent management. Here’s my Top Ten list of what large companies do to lose their top talent :

1. Big Company Bureaucracy. This is probably the #1 reason we hear after the fact from disenchanted employees. However, it’s usually a reason that masks the real reason. No one likes rules that make no sense. But, when top talent is complaining along these lines, it’s usually a sign that they didn’t feel as if they had a say in these rules. They were simply told to follow along and get with the program. No voice in the process and really talented people say “check please.”

2. Failing to Find a Project for the Talent that Ignites Their Passion. Big companies have many moving parts — by definition. Therefore, they usually don’t have people going around to their best and brightest asking them if they’re enjoying their current projects or if they want to work on something new that they’re really interested in which would help the company. HR people are usually too busy keeping up with other things to get into this. The bosses are also usually tapped out on time and this becomes a “nice to have” rather than “must have” conversation. However, unless you see it as a “must have,” say adios to some of your best people. Top talent isn’t driven by money and power, but by the opportunity to be a part of something huge, that will change the world, and for which they are really passionate. Big companies usually never spend the time to figure this out with those people.

3. Poor Annual Performance Reviews. You would be amazed at how many companies do not do a very effective job at annual performance reviews. Or, if they have them, they are rushed through, with a form quickly filled out and sent off to HR, and back to real work. The impression this leaves with the employee is that my boss — and, therefore, the company — isn’t really interested in my long-term future here. If you’re talented enough, why stay? This one leads into #4….

4. No Discussion around Career Development. Here’s a secret for most bosses: most employees don’t know what they’ll be doing in 5 years. In our experience, about less than 5% of people could tell you if you asked. However, everyone wants to have a discussion with you about their future. Most bosses never engage with their employees about where they want to go in their careers — even the top talent. This represents a huge opportunity for you and your organization if you do bring it up. Our best clients have separate annual discussions with their employees — apart from their annual or bi-annual performance review meetings — to discuss succession planning or career development. If your best people know that you think there’s a path for them going forward, they’ll be more likely to hang around.

5. Shifting Whims/Strategic Priorities. I applaud companies trying to build an incubator or “brickhouse” around their talent, by giving them new exciting projects to work on. The challenge for most organizations is not setting up a strategic priority, like establishing an incubator, but sticking with it a year or two from now. Top talent hates to be “jerked around.” If you commit to a project that they will be heading up, you’ve got to give them enough opportunity to deliver what they’ve promised.

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Top people with good resumes and interpersonal skills are able to find work even in a bad economy. With raises at 1-2% or less in many cases and few people embedded in higher positions voluntarilly leaving, the easiest way move up is to move out.

20 years of corporate layoffs and showing that employees are expendable has led to the realization among employees that their labor is a commodity and should be sold to the highest bidder. Loyalty is dead. Younger stars laugh at “paying your dues”.

You forgot #1: corporate doublespeak. If people insist on long, pointless meetings where a bunch of so-called managers and leaders sit around a boardroom table tossing out buzzwords in a pathetic attempt to impress others, chances are that anyone with any kind of talent is going to want out.

No one with any real talent is going to sit and listen to someone talk about the enhancement of corporate infrastructure and a customer-centric focus that will adapt to the ever-changing paradigms of a global marketplace and take it seriously.

Nice post Eric. I am ERP consultant and I have some experience of working on HR business process. After reading the entire blog, I find that the top 10 reason mentioned in this blog is very much similar with what I had thought earlier. I am surprised and at the same time it feels me good. Based on my understanding on the attrition rate, I had published a blog on dated: “Thursday, December 9, 2010″.

Great Great Article!! I think you’ve covered most of the bases in this report…especially “career development” for the best talent I absolutely agree with that! Another “keeping best talent” magnet is to “Challenge Them”. Typically highly successful people like to be challenged because it keeps them inspired…the key is you have to have strong/capable leaders who can command respect from high performers. Challenging the “Best Talent” takes patience, humility, and support!

The boss is often the most vital reason for the loss of talent. Often if the boss is himself not as talented, or is not capable, the boss suffers from a complex. In addition if the boss has a big ego, you had it.

Most of the article is quite true. But, if you think it’s bad in corporate America, try state government where politics — not organizational politics which exists everywhere but petty state politics — rules the day.

In response to “Top Ten Reasons Why Large Companies Fail To Keep Their Best Talent,” has there ever been a book written that applauds the companies that keep their most talented employees?

Might an organization that exists to award “five star” ratings for companies that keep their most talented employees be highly productive at this critical time in the United States?

Wish top companies would take to heart the “Top Ten Reasons…” article. Have a sick feeling top companies just keep blundering merrily along in blissful derision, to the frustration of talented individuals who might possibly revitalize our economy.